vi FCONOMETRIC METHODS: 1.3 To derive cov(a, b) 1.4 Gauss-Markov theorem 15. To derive var(eo) Problems Further Aspects of Two-Variable Relationships 2.1 Time asa Regressor % "2.1.4 Constant Growth Curves 2.1.2 Numerical Example 2.2 Transformations of Variables 2.2.1 Log-Log Transformations 22.2 Semilog Transformations 2.2.3 Reciprocal Transformations 23 An Empirical Example of a Nonlinear Relation: U.S. Inflation and Unemployment 2.4 Lagged Dependent Variable as Regressor 24.1 An Introduction to Asymptotics 2.4.2 Convergence in Probability 24.3 Convergence in Distribution 244 The Autoregressive Equation 2.5. Stationary and Nonstationary Series 25.1 Unit Root 25.2. Numerical Illustration 2.6 Maximum Likelihood Estimation of the Autoregressive Equation 2.6.1 Maximum Likelibood Estimators 2.6.2 Properties of Maximum Likelihood Estimators Appendix 2.1 Change of variables in density functions 22 Maximum likelibood estimators for the AR(1) model, Problems The k-Variable Linear Equation 3.1. Matrix Formulation of the -Variable Model 3.1.1 The Algebra of Least Squares 3.1.2 Decomposition of the Sum of Squares 3.1.3 Equation in Deviation Form 3.2. Partial Correlation Coefficients 3.2.1 Sequential Buildup of the Explained Sum of Squares 3.22. Partial Correlation Coefficients and Multiple Regression Coefficients 3.2.3. General Treatment of Partial Correlation and Multiple Regression Coefficients 3.3. The Geometry of Least Squares 3.4 Inference in the k-Variable Equation 3.4.1. Assumptions 3.4.2 Mean and Variance of b 36 36 37 37 aL 82 83 86 86 87